O K Bazaars (1929) Ltd v Cash-In CC

• Jurisdiction: South Africa
• Judge: Hoexter JA, Vivier JA, Kumleben JA, Nienaber JA and Kriegler AJA
• Judgment Date: 02 December 1993
• Docket Number: 320/91
• Court: Appellate Division

Hoexter JA:

A contract of lease between the respondent as lessor and the D appellant as lessee gave the latter a conditional right of renewal of the period of the lease. When the appellant sought to renew the lease the respondent challenged its right to do so. Thereafter the respondent instituted an action against the appellant in the Cape of Good Hope Provincial Division. The respondent sought a declaratory order to the effect that the appellant was not entitled to exercise the right of renewal. The action, which was resisted by the appellant, came before E Scott J. Having heard evidence and argument thereon the learned Judge ruled in favour of the respondent. The appellant was ordered to pay the costs, including the costs of two counsel. The judgment of the Court below has been reported as Cash-In CC v O K Bazaars (1929) Ltd 1991 (3) SA 353 (C). With leave of the trial Judge the appellant appeals to this Court F against the whole of the order of the Court a quo.

In the heart of the town of Knysna the respondent is the owner of six erven on which there stands a building housing, inter alia, extensive supermarket premises ('the premises') which have a shopping floor area of about 1 700 square metres. Bounded by two parallel streets, Nelson Street G to the south and Main Street to the north, the premises face Main Street but are separated from it by an asphalt parking area ('the car park') which is able to accommodate some 150 motor cars. Cars enter the car park from Main Street and leave it by an exit ramp to the west of the premises, which descends into Nelson Street. The car park is on a higher level than Nelson Street. Between the exit ramp and the east side of the building H there is a grass embankment as well as a gravel area abutting Nelson Street.

On 11 July 1980 the respondent entered into a written contract of lease ('the original lease') with a private company ('Knowles') in terms of which the latter hired the premises for a period of nine years and 11 months, subject to a conditional right of renewal. Knowles took occupation I under the original lease in 1981 and successfully operated a supermarket in the premises until 1986, when it experienced financial difficulties and sought to cede its rights under the original lease to the appellant. The respondent refused to consent to the cession and litigation between the respondent and Knowles followed. Ultimately a settlement was reached in terms whereof, and subject to certain amendments to the original lease, J Knowles ceded its

Hoexter JA

A rights and assigned its obligations thereunder to the appellant. This agreement was recorded in a written contract entitled 'Agreement of Cession and Amendment of Lease' to which Knowles, the appellant and the respondent were parties. To this agreement reference will hereunder be made as 'the lease'. The appellant signed the lease on 4 July 1986 and it B took occupation of the premises at about that time.

The lease involved amendments, inter alia, to the method of calculation of the rental fixed in the original lease. The rental payable by the appellant was determined by means of a rather elaborate formula. Broadly speaking the annual rental payable was the greater of the following two C amounts: (1) a multiple of certain minimum rentals payable monthly to the respondent and (2) a fixed percentage of the appellant's net annual turnover augmented by further sums calculated by reference to the turnover and rental of subtenants. Of importance in regard to the matter are the provisions of clause 6.6 of the lease. It reads as follows:

'Within three months after the end of each lease year the lessee shall D deliver to the lessor an auditor's certificate -

(a)

setting out its net annual turnover for that lease year and the net annual turnover from the subtenants referred to in subclause (5)(b)(ii) above during that lease year;

(b)

setting out the rental payable by subtenants of the lessee as referred to in subclause (5)(c) above, as well as the lessor's share thereof;

E signed by its auditors and it shall pay to the lessor the balance if any of the annual rental payable for that lease year within seven days after delivery of the auditor's certificate. The said auditor's certificate shall set out all such information as is necessary or desirable to enable the lessor to calculate the annual rental payable during the lease year concerned.'

F The lease contained various provisions aimed at ensuring the cleanliness of the premises and their environs and the prevention of nuisance. One amendment of the original lease involved the insertion of a new clause ('the litter clause') in terms of which

'. . . it shall always be and remain the obligation of the lessee to keep the car park in a clean and tidy condition and free of litter'. G

In terms of clause 7.5 ('the nuisance clause') of the lease the lessee

'shall not do or permit to be done anything which may cause or be a nuisance or annoyance to the lessor or to the persons occupying other portions of the lessor's building or to the neighbours generally'.

H During the course of the trial the respondent amended its particulars of claim by pleading a variation of the lease ('the later term'). It was reflected, so it was alleged, in an exchange of letters, in terms whereof the appellant had also agreed to keep certain further areas, and in particular the grass embankment, the gravel area and the pavements surrounding the car park, in a clean and tidy condition and free of I litter. The existence of such a term so alleged was denied by the appellant.

Of crucial importance in the dispute between the parties are the provisions of the renewal clause in the lease. Clause 3 reads as follows:

'3. Right of renewal

J 3.1 Provided the lessee shall have faithfully carried out the terms and conditions of this lease and provided the lessee is in no way in default hereunder at the

Hoexter JA

A expiration of this lease, then the lessee shall have the right of renewing this lease for a further period of nine years and 11 months upon the same conditions and at the same rental as herein set out save that there shall be no further right of renewal.

3.2 In the event of the lessee desiring to exercise the right of renewal aforementioned, written intention to exercise such option must be given to the lessor not less than six months before the date of B expiry of this lease, failing which such right of renewal shall cease and determine.'

Within the time limit prescribed by clause 3.2 the appellant gave to the respondent written notice of its intention to exercise the option of renewal. Contending that the appellant had not satisfied the conditions to which the right of renewal was subject, the respondent disputed the C appellant's right to renew the lease.

The second proviso in clause 3.1 requires that at the expiry date of the lease the lessee '. . . is in no way in default hereunder . . .'. Whatever may or may not have taken place earlier during the currency of the lease, it is common cause that at the expiry date the appellant was not in breach D of any of its obligations under the lease. The bone of contention in the case is the first proviso in clause 3.1 which requires that the lessee

'. . . shall have faithfully carried out the terms and conditions of this lease . . .'.

The respondent contended that the first proviso had not been satisfied. It alleged that the appellant had no right to exercise the option to renew E the lease for the reason that during the currency of the lease, and in various respects, the appellant had failed to carry out faithfully the terms and conditions of the lease. In its particulars of claim, as amended, the respondent alleged that:

(a)

in breach of clause 6.6 the appellant had persistently failed F timeously to deliver the auditor's certificate; and,

(b)

in breach of the litter clause and the nuisance clause the appellant had continually failed to keep the car park in a clean and tidy condition and free of litter; and

(c)

in breach of the nuisance clause the appellant had failed to clean the drains at the rear of the premises and to keep in a clean G condition the delivery area and the wet rubbish storage area, in consequence whereof noxious odours and infestations of flies had created a nuisance to a neighbour, Mr M Zeelie; and,

(d)

in breach of the later term the appellant had continually failed H to keep the grass embankment, the gravel area and the pavements surrounding the car park in a clean and tidy condition and free of litter.

Although the legal consequences flowing therefrom were throughout a matter sharply in issue between the parties, the fact that the breach of contract indicated in (a) above (failure timeously to deliver the auditor's I certificate) had been repeatedly committed was common ground. In the Court below much of the evidence adduced was devoted to the factual issues raised by the alleged breaches (denied by the appellant) mentioned in (b), (c) and (d).

In the result Scott J found (at 363A-C) that in the light of the meaning J properly to be assigned to clause 3.1, and having regard to the persistent

Hoexter JA

A nature of the appellant's breach of the provisions of clause 6.6, the appellant had no right to a renewal of the lease. Accordingly the learned Judge (at 363C-D) found it unnecessary to decide whether during the currency of the lease the appellant had breached any other clauses of the lease.

B When attention was given to the preparation of the appeal record the attorneys respectively representing the parties formally agreed in writing to limit the record. Pursuant to such agreement there was excised from the appeal record the bulk of the evidence dealing with the disputed factual issues raised by the alleged breaches (b), (c) and (d). The agreement so to truncate the...